A new report reveals that the cost of renting during retirement is driving pensioners to poverty.
A new report out today reveals that while it may seem like a shaky investment in the current economic climate, in the long run buying a property does pay.
Research by pensions and investment company Friends Provident has found that the cost of renting is driving many pensioners into poverty with those that don’t own their own home £133,117 worse off than their homeowner counterparts.
They found that on average the cost of renting during retirement (including ground rent, service charges and utilities) accumulates to a massive £11,491 a year compared to the more affordable £3020 homeowners are estimated to spend on their property.
To maintain this level of outgoing during a typical 16 year retirement, Friends Provident estimate that a 23 year old would have to save 275% extra throughout the course of their working life, equating to £150 a month, compared to the £40 contribution necessary to support the living costs of a home owner.
This figure rises to a 291% difference for those who don’t start saving until their 40’s with home owners only needing to put £115 away a month compared to the massive £450 necessary for those who plan to rent.
While the good news is that, as a new survey by AXA revealed, over 70% of the population start to make regular contributions to a pension by the time they’re 28, setting them in good stead to fund their retirement. With property harder and harder to come by it’s more difficult for potential buyers to make their first step onto the ladder, potentially leaving more individuals open to the possibility and financial uncertainty of renting after they finish work.
Head of pensions marketing at Friends Provident Jeremy Ward commented: "Renting a property can often be a difficult cycle to break out of due to the initial money and deposit needed to purchase a house."
"Renting during retirement creates further difficulties and means that renters need to be more prepared and have a much larger annual income in retirement to keep a roof over their heads. In turn this means that renters need to be aware of the extra income required and make provisions for this in their pension planning."
Compare mortgages via money.co.uk
